Stocks Rally After Bank of Japan Revamps Policy
21 September 2016 - 9:30AM
Dow Jones News
Stocks rose, the yen retreated and long-dated government bond
yields rallied around the world early Wednesday after Japan's
central bank affirmed its commitment to aggressive easing as it
introduced a new monetary policy framework.
The Stoxx Europe 600 was up 1% in the early minutes of trading,
led by the banking sector, while futures pointed to a 0.6% opening
gain for the S&P 500.
At the conclusion of its monetary policy review on Wednesday,
the Bank of Japan introduced an interest-rate target for 10-year
government bonds, committing to keep them around zero, and said it
would continue quantitative easing until inflation "exceeds" 2%. It
left its main interest rates unchanged.
Banks and insurance companies in Japan rallied amid relief the
bank didn't cut interest rates lower and on hopes that a steeper
yield curve would boost bank profits. The Nikkei Stock Average
jumped 1.9%, while the TOPIX banks sector jumped around 7%.
Bank stocks in Europe climbed 2.5% in early trading.
The dollar rose 0.6% against the yen to ¥ 102.2410, while
10-year Japanese government bond yields climbed into positive
territory for the first time since March before falling back to
trade at minus 0.025%.
Moves in Japanese bonds rippled overseas, as the yield on the
10-year U.S. Treasury note rose to 1.705% from 1.687% Tuesday,
while German 10-year yields returned to positive territory at
0.012%. Yields move inversely to prices.
"We think the commitment to overshooting the inflation target
suggests that monetary easing will continue for longer than
previously expected," analysts at Standard Chartered wrote in a
note.
Still, some investors were skeptical the market moves would
last. "When the dust settles, we think this will be seen as a
disappointment," said Adam Cole, currency strategist at RBC Capital
Markets, noting the BOJ's instruments ultimately remain little
changed.
Investors were also focused on the Federal Reserve's September
monetary policy meeting, concluding later Wednesday. While few
expect the bank to raise rates, any hints at a rise in December
could call into question a steady rise in risky assets such as
stocks over the summer.
Takashi Nakamichi contributed to this article.
Write to Riva Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
September 21, 2016 04:15 ET (08:15 GMT)
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